Interview: Rhys Davies on Value, Values, and Asset Management Decision Making

We had the opportunity to interview Rhys Davies, Chairman of the ISO Project Committee TC251 Asset Management, on the topic of “Value, Values and Asset Management Decision Making”. This is a topic that’s near and dear to us here at Copperleaf—specifically, how an organization’s strategic objectives and values can be used to develop a framework for asset management decisions. In this Q&A, Rhys shares his perspective and insights:

What are the key benefits of adopting ISO 55000?

There are a lot of quoted benefits and numerous places to go to look for them. The obvious one to cite is the ISO/TC251 website which lists the following:

• Performance improvements
• Cost improvements
• Management of risk
• Assurance of business growth and improvement
• Reliable decision making
• Enhanced stakeholder confidence through compliance and improved reputation

You could also go to www.theIAM.org which also lists many benefits.

However, if you asked me to pull out something a little different in addition to all of these (with which I agree) then I would say one of the greatest benefits is a change in culture in the organization. I truly believe that in an organization that has adopted AM concepts and allowed them to mature, there is a clear view about where the organization is headed and where it should be investing its limited spend to best deliver value and manage risk to acceptable levels.

What has the feedback been from organizations that have adopted the standard?

It’s been three years since we published the ISO 5500x series of standards and the feedback to date has been very positive. The standards have been translated into 10 languages covering the bulk of the business world. We have also seen examples of certification popping up in very diverse sectors all around the globe, so even at this early stage (yes – in the world of management system standards, at 3 years old we are still very young!) we know that the standards are well respected and successful.

Four Key Themes of Asset Management (extracted from “ISO 55000 Asset Management – A Biography” Published by ReliabilityWeb and Authored by R. Davies and D. Humphrey)

Can you pass along any recommendations for success?

I think the big message is not to agonize over the fact that you need procedures for everything. The value for most organizations is not simply in implementing the requirements of the standards, the value is in embracing the wider concepts of asset management, getting your objectives aligned, and having clear rules for making decisions that are consistently applied. Take a long term view and make wider business risk a part of your daily thinking and decision-making processes. In simple terms, implement good AM practice, the process will sort itself out if you are genuinely doing it right.

Another area to focus your attention on are some of those subtle but hugely important finance requirements. Ultimately, asset management is about choosing where to spend limited dollars to generate best value. This means persuading the finance people and senior management that it is the right thing to do. One of the best ways to start that journey is to get your information systems aligned between engineering asset registers or maintenance management systems and the financial information systems. I always find its so much easier to talk to the finance team about assets that they recognize in the same way that you do.

Are there any stumbling blocks or pitfalls that could be avoided?

This one is simple! Don’t assume you can’t adopt asset management because your data isn’t good enough or because you want to wait five years until you’ve implemented a new information system. AM is about decision making and while decision making requires good knowledge about the asset base, you can still make decisions with knowledge from a variety of sources. Possibly the worst mistake many organizations make is to start their AM journey by spending millions of dollars on a new enterprise information system. Why do I say that? Imagine a world where you choose what information to collect when you haven’t yet decided how you will make decisions and therefore what information you need to make those decisions?

Some would say that standards are merely a tick box exercise and deliver little value to organizations. What is your view?

Always an interesting question. For an organization that is simply seeking a piece of paper on the wall, there is always the potential for standards to be exactly that – a tick box exercise! Fortunately, so far the ISO 5500x series of standards is attracting organizations who genuinely want to improve their business. It is generating a focus on understanding and delivering stakeholder value using risk as a basis for transparent and consistent decision making based on good asset knowledge over the long term.

I am sure there will come a time where ISO 55001 becomes commoditized in the market and people are simply seeking a piece of paper on the wall. Cynics might point to ISO 9001 as such an example but I would argue that for every organization that is only seeking the piece of paper, there are many more who genuinely adopt standards to improve what they do. The aim of standards is to share good practice and I firmly believe in our mission in TC251 to capture emerging good practice in our standards and then to publicize those standards to share it more broadly. It is a good and cheap means to share good practice.

How can ISO 55000 help utilities in particular?

ISO 55001 is relevant to any organization that is dependent upon its asset base to generate value for its stakeholders. Utilities have a group of stakeholders like all organizations, but because of their unique quasi-monopolistic situation they often have a particularly visible or dominant stakeholder in the form of a regulator that sets out specific requirements for the service they deliver. In many parts of the world, the regulator also sets the rate case or pricing structure that the utility is allowed to charge its customers. This situation makes utilities quite unique and means that the arguments for transparent rules for investment decision making become essential.

Moreover, utilities are also subject to scrutiny. In this business context, standards become helpful in demonstrating that you have complied with requirements or have processes in place to provide assurance that decisions are being made transparently and consistently. ISO 55001 explicitly provides that assurance when applied correctly and therefore it is of relevance to both utilities and other industries where providing assurance to external stakeholders is important.

What’s the difference between “value” and “values”, and why is this topic important to you?

That is a great question! Asset management is often quoted as being the management activities that help us to derive “value” from our asset base. As such, “value” needs to be carefully defined. Often people perceive it to be only financial value like profit or return on capital, but for many organizations it can be a mix of different kinds of objectives. “Value” could just as easily be derived in terms of increases in safety performance or reductions in environmentally damaging emissions. For many public sector organizations like municipal governments, it could literally be resident happiness or ambience in a public park.

The key thing to remember about “value” is that it is ultimately defined by an organization’s stakeholders in the widest sense. That’s why ISO 55001 includes requirements to identify who the various stakeholder groups are, and to engage with them to understand their needs, wants and expectations which as a management team you can then convert into organizational objectives. If we are delivering the needs, wants, and expectations of our collective stakeholders, then we are truly delivering “value”.

We also need to make choices over how we balance delivery of different kinds of “value”. Most organizations publish some kind of statement on their organizational “values” stating things like their people, safety, or the environment are core to their values and will be the focus of their decisions. In practice, I see few organizations that genuinely use their “values” to make decisions but the leading-edge organizations are capturing in the form of a “value framework” the rules they will use to make decisions based on the set of “values” that the organization has adopted.

Having discussed these points with Rhys, it’s interesting to see that Copperleaf’s value-based decision-making approach adopts many of the principles used by leading practitioners. It also captures it in software to help them to visualize the complex balancing of factors involved in real-world decision making in asset-intensive industries.